City deny any wrongdoing and have until October 2nd to appeal the 114 financial charges brought against them. The club are accused of using "sham" contracts to disguise more than £900m in funding and falsely increase revenues between the 2009-10 and 2017-18 campaigns.
The club could face relegation or expulsion from the Premier League if the unprecedented 114 charges are upheld as well as their titles being stripped in a move that may destroy the side.
Speaking on the Stick to Football Podcast, Neville spoke on the news that has been widely debated. The former United star insisted that City's owners step down for the sake of the club, who have effectively cheated the Premier League.
"Manchester City will recover as a football club because Manchester City have been there longer than these owners, they'll be there long after them, and it's got an immense history.
"Points deductions, fines, transfer bans, removing the titles - not giving them to others, just removing the titles - it's significant punishments. The only punishment that would be fair would have huge consequences - the biggest consequence - would be removing the owners.
"That is the only consequence if I was Manchester City that I would be worried about. And as a fan of Manchester City, if you wanted to keep the investment that you've currently got, that would be the one I'd be most concerned about."
He later said: "This has now come into our country, this has now come into our league. This is the greatest export that we have in our country in the world.
"If you go around the world and talk about Liverpool, Manchester, Arsenal - people talk about the Premier League more than anything when you tell them where you're from in the world. And at the moment, we're being dragged through the mud."
City were significantly in breach of both the Premier League's and UEFA's spending limits and despite their confidence, their appeal is unlikely to be accepted.
An unprecedented sporting sanction in the region of 50 to 80 points has been suggested and the side may still be stripped of their titles during the stated period.